Comparing Human Resource Management in Multinational Companies - Literature review Example

?Literature Review: Comparing human resource management in multinational companies in Hong Kong, and HRM in Hong Kong local companies. Are the differences due to institutional or cultural differences? Human resources management in multinational companies in Hong Kong and HRM in Hong Kong local companies have distinct differences from each other. These differences seem to be credited to various elements and factors. Studies compare human resources practices in Asian countries in relation to multinational corporations and local companies. In the study by Bjorkman and Lu (1999) discussed how the recruitment, motivation, and retention of Chinese professionals is a significant challenge for multinational companies in China. Their study was carried out to cover how local managers and professionals are managed in Western companies under joint ventures with local industries. Their study was able to cover 65 Chinese-Western joint ventures and they were able to establish that various Western human resources management have been implemented in China (Bjorkman and Lu, 1999). However, these companies were not able to completely implement human resources practices from their home country to their Chinese company. In other words, the local culture seems to play a huge part in the human resource management practices in Chinese companies. Sparrow and Hiltrop (1994) discuss that for Western companies, the assessment of performance are usually based on annual interviews between the individual and his or her superior, sometimes with the HR managers taking some part in the assessment process. For Chinese companies, individual employees usually take yearly self-assessment activities with the opinions of colleagues, subordinates, and superiors often considered in the evaluation process. One-on-one interviews as discussed by (Easterby-Smith, et.al., 1995) are not usual practices. Easterby-Smith, et.al., (1995) also point out that an imposing and personal approach to employee evaluation is avoided as much as possible for these Chinese companies. For MNCs operating in China, their HR practices are often influenced significantly, especially in relation to their local employees. The expectation for most local employees is for the application of their local culture in HR management and for multinational corporations (MNCs) the concessions would be an easier transition for them to make (Easterby-Smith, et.al., 1995). Child (1995) also discusses the focus given to individual performance and educational attainment predicting career development for Chinese firms. Moreover, favourable personal relations and the right political attitude seem to play also a strong role in the human resources management in Hong Kong firms. Favourable personal relations are part of the cornerstone of the Chinese culture which is also part of the socialist principles of management (Child, 1995). Wages have traditionally been managed by government bodies and age was often considered one of the most crucial predictors of employees’ earnings in government enterprises. In the 1990s, age became the more important determinant for earnings. More advanced education and training was also considered an important determinant for pay levels (Child, 1995). MNCs operated under these conditions and eventually influenced the determinants of pay levels in Asian companies. However, there are still differences in the management of these elements for local companies and MNCs in China because there is still resistance to the implementation of reform in the system, especially in relation to group incentive processes (Easterby-Smith, et.al., 1995). Bjorkman and Lu (1999) also emphasize that Western and Chinese models in HRM are different in various respects. For modern Western conceptualization of HRM, they consider employees as important resources which must be effectively managed. They consider the importance of systematic recruitment as well as training and development of human resources. They also consider personal involvement and participation in organizations as important elements of human resources management (Bjorkman and Lu, 1999). This concept is rarely seen in Chinese companies (Bjorkman and Lu, 1999). The role of HRM in Western companies is to ensure service to the management, for Chinese firms however, they tend to be directed towards establishing control over employees (Bjorkman and Lu, 1999). This study was able to present an important glimpse of HRM in the east which is culturally distinct and different from the west. This study does not however focus on any particular firm in China, but provides a more general understanding of HRM practices. It also focuses on Chinese HR practices, which also has its differences from Hong Kong which used to under British control. The fact that Hong Kong is considered a blend of the eastern and western influence, there is a need to consider Hong Kong specifically, for a possible study, in order to evaluate how such blend impacts on the human resources management of local and international firms. The study by Fields, et.al., (1994) was carried out in order to compare the tendency of US and Hong Kong Chinese companies in applying alternative human resource management strategies as a means of offsetting issues in labour supply. Data was based on 158 US and 66 Hong Kong companies. The extent to which these corporations engaged in training, monitoring, assessment, and staffing in their labour market was considered. Data was also gained based on uncertainties in the supply of qualified employees (Fields, et.al., 1994). The study revealed that when labour uncertainties were encountered, HRM strategies were utilised more by Hong Kong companies, but were decreased by US corporations. In effect, this study indicates how cultural differences impact on businesses; moreover, these results may indicate how companies react to environmental uncertainties and resource dependence (Fields, et.al., 1994). This study implies that cultural elements play a crucial role in the HRM in Hong Kong, for both local and multinational companies. The overall consideration for these companies is on the establishment of adaptable human resource policies, policies which would fit the needs of the employees. Inherently however, the impact of the host country, in this case, Hong Kong would have a significant effect on the human resources management in these companies. Shaw (1992) considered data from 151 Hong Kong companies in order to establish the impact of culture, firm size, unionisation, and other elements, to human resources management practices. The authors were basically able to establish how culture is a weak predictor in human resources practices (Shaw, 1992). For unionisation, the presence of a human resources department became moderate predictors and for firm size, the existence of specialised training departments for HRM departments was a strong predictor in HR practices (Shaw, 1992). This study further indicates how multinational firms were more likely to utilise performance appraisal and feedback processes as compared to their Chinese counterparts. For Chinese firms on the other hand, they placed more focus on saving one’s “face.” This belief is very much supported by cultural theorist Hofstede (1988) who also emphasized on the avoidance of situations where formal performance evaluation may cause the loss of face through poor performances from employees or managers. Shaw’s (1992) study also points out how international and Anglo-American corporations were more likely to focus on technical elements in order to establish pay levels, mostly using formal wage surveys and job evaluations tools. These processes would follow the basic premises of seniority wage systems, including wider benefit programs issues for international MNCs (Shaw, 1992). Local firms in Hong Kong have functioned under laissez-faire processes where the government has not secured much emphasis on welfare and benefit programs. For Western organizations, they have been keener in securing formal training for employees as compared to Hong Kong firms. For Hong Kong, the cultural element was not significantly related to formal training processes applied (Shaw, 1992). International firms did manifest a larger extent of formal training as compared to Chinese firms. This indicates that Chinese firms, including those in Hong Kong do not have a significant desire to formalize training procedures for their employees. Chinese firms often prefer informal organization setups, credited more to an institutional setup, not so much a cultural influence (Shaw, 1992). Wong (1997) discussed human resource policies implemented by two Japanese retail stores in Hong Kong. The study established how the two Japanese stores implemented different HR policies in the selection and recruitment as well as the training of different groups of employees within their Hong Kong operations (Wong, 1997). The HR policies for different groups of employees are founded on the parent company’s policies, including institutional policies of the parent company. The types of employee in the stores were secondary elements which were considered in the HR policies, followed by the level of skills among the host country nationals (Wong, 1997). This study also supports the results as indicated Shaw study which expressed how institutional elements for corporations operating in Hong Kong have a more significant weight in the HR policies implemented in the multinational company in Hong Kong. The results of this study indicate how the corporate policies of the home country origin bear a significant amount of weight in the human resources management of MNCs in Hong Kong (Wong, 1997). The impact of culture does not seem to be a significant element in these instances. There are various determinants for HR practices. One of these determinants is the dominant culture of the corporate owners. The usual trend for MNCs is to transfer their culture in their operational policies to their foreign subsidiaries (Schneider, 1988). The corporate culture from their home countries is often also often applied in their host countries with similar expectations in terms of human resources management among their employees. In these instances a standard corporate culture is expected under these circumstances with foreign branches expected to not be influenced by the culture of their host countries. Dicle, et.al., (1988) however also discuss that some local modifications are often implemented for human resources in these foreign subsidiaries. It is also important to note that the operations of Chinese firms in Hong Kong usually retain their distinct local qualities in human resources management (Dicle, et.al., 1988). In effect, they are often unaffected by the culture seen in American or British firms. Some form of local adjustment may also be implemented for American and British firms operating in foreign countries, however, the Chinese firms are not likely to make the same adjustments as those taken by the foreign MNCs. Redding (1986) also discusses that Chinese firms have a centralised quality in their decision-making processes and control. They also display loose and flexible organizational systems, including paternalistic and more autocratic managerial processes. Hofstede (1984) also discusses how Chinese firms, including those in Hong Kong are affected by cultural qualities including high power distance and collectivism. For American and British firms, the human resources culture is based on an individualistic and limited power distance (Redding, 1986). For Chinese firms operating in Hong Kong, their emphasis is on collectivism which seeks to highlight the importance of close family relations as well as mutual obligations among family members (Redding, 1986). The Chinese firms in Hong Kong have also been less likely to establish extensive self-promotion policies as compared to their American and British counterparts. These Chinese firms would also be less likely to consider a comprehensive performance assessment and feedback policy as compared to the American and British firms. Chinese firms give a high degree of importance to “face” and age in terms of the respect which must be accorded to older individuals and authority. For American and British firms operating within and outside their home countries, rationalism and individualism is strong (Kirkbride and Tang, 1992). Moreover, the focus on appraisal and feedback processes in these organizations also allows these firms to use such data to serve various purposes within the organization. Kirkbride and Tang (1992) discuss how Hong Kong Chinese companies are usually small and have limited excess staff that can undergo training activities. These firms also believe that, where more training for their staff can be carried out, these talents can then be poached by other firms (Kirkbride and Tang, 1992). In effect, Chinese firms are less likely to have training programs for their staff, whereas, American and British MNCs are likely to have training programs for their staff, regardless of their locations. The informal socialization process for Chinese firms is also usually focused on family members, not so much on the entire work force. In other words, these firms do not put much credence to extensive and formal socialization programs in their human resources management systems (Kirkbride and Tang, 1992). They will also resort to less formal job assessment methods, and they would not be likely to utilise standard appraisal measures to evaluate work performance or determine work advancement thresholds (Kirkbride and Tang, 1992). Shaw, et.al., (1992) also discuss that the local Chinese firms in Hong Kong usually rely on few elements including family, social background, and educational achievements for their selection methods. Consequently, Shaw, et.al., (1992) discusses that the recruiting and selection systems for Chinese firms operating in Hong Kong are not as extensive when compared with the systems applied by American and British MNCs in Hong Kong. Moreover, the compensation policies for these Chinese organizations would be significantly impacted by the Confucian principles which place a prime importance on age and seniority (Shaw, et.al., 1992). As a result, incentive pay and standard methods of job evaluation, including wage surveys are often not applied in Hong Kong firms. Shaw, et.al., (1992) discusses that Chinese firms in Hong Kong may have a more extensive social welfare system, however, due to the laissez-fair policy of the Hong Kong government, not much pressure has been placed on firms to ensure welfare and fringe benefits for their employees. On the other hand, the US or British firms are more likely to ensure that these elements of employment and human resources would be protected (Shaw, et.al., 1992). Under these conditions, the Chinese firms in Hong Kong are more likely to seek resolution of human resources issues and other policies based on family dynamics (Shaw, et.al., 1992). In the Ngo, et.al., (2010) study, the authors set out to evaluate the impact of country origins on human resource practices of firms from the United States, Great Britain, Japan, and Hong Kong operating in Hong Kong. The study, in general, supported the hypothesis that there are differences in human resource management of firms from different countries operating in Hong Kong. Human resources management, especially those which relate to training and the development of workers as well as the retention-oriented compensation was mostly related to institutional performance (Ngo, et.al., 2010). Moreover, the country of origin usually served as the monitoring element for human resource management in foreign firms. Specifically, the relations of structural training and development were stronger for Hong Kong firms. This point seems to differ from the results established under the Shaw study which pointed out the weaknesses of structural training for employees in Hong Kong firms as compared to international MNCs (Ngo, et.al., 2010). This study by Ngo and colleagues (2010) is however more recent and covers more specific countries for assessment. Nevertheless, there seems to be a major issue which needs to be settled in terms of the structural training for Hong Kong and for international firms operating in Hong Kong. These elements of the research are part of human resource management and an assessment of these elements must therefore be further reviewed in future related studies in order to establish clear and comprehensive results. Martinsons’ (1994) study sought to compare the sophistications seen in information systems and human resources systems in Hong Kong and in Canada. About nine human resources management activities were considered in the study evaluating their application in Canada and in Hong Kong. The study revealed that Hong Kong had poor sophistication in information systems and human resources systems (Martinsons, 1994). The study also established the importance of management vision and support, including the business-driven approach in human resources management, especially in terms of related information. The study also established that regulatory elements including both institutional and cultural elements accounted for the various differences in human resource systems in Canada and in Hong Kong (Martinsons, 1994). Their study also highlighted the importance of information systems and technology in the human resources management where the Canadian firms have already adapted such systems into their organizations. For Hong Kong firms, there are gaps in the implementation of these information systems because there are other significant elements, including the institutional and cultural factors which seem to be relevant in the human resource processes (Martinsons, 1994). In Aryee, et.al., (1999), the authors set out the evaluate the relationship between role stressors, role conflicts, and the moderating impact of spousal support and coping among Hong Kong employed parents in dual-earner families. This study was able to cover 243 respondents (Aryee, et.al., 1999). This study also considered how human resources management in local and multinational companies in Hong Kong had different styles of management in relation to the above variables. Results indicated that parent overload was often related to family work conflicts, and that work overload was often apparent with work and family conflicts (Aryee, et.al., 1999). These conflicts had negative effects on job and life satisfaction. For Hong Kong firms, significant adjustments among human resources managers were often applied primarily because of strong family ties within the businesses. For multinational corporations operating in Hong Kong, elements involving family issues and human resources management were based on institutional policies (Aryee, et.al., 1999). Institutional policies usually supported allowances for family emergencies. However, expectations on return to work and the filing of leaves were usually expected of employees. Black and Porter (1991) discussed how there were limited studies which sought to evaluate how American managers were able to function while on assignments in foreign countries. This study also considered the self-reported managerial activities of American expatriate managers in Hong Kong to American managers in the US and Hong Kong Chinese managers in Hong Kong (Black and Porter, 1991). All in all, the study indicated that American expatriate managers in Hong Kong employed more or less similar human resource management policies as their American counterparts in the US (Black and Porter, 1991). Human resources policies based on the firms involved were also positively related to job performance where the managers from the US were able to apply their management practices in their local subsidiaries. This practice worked well for local industries, especially where local Chinese cultures and institutional practices were applied by the managers (Black and Porter, 1991). In other words, the human resources functions were often based on the country of origin, and so far as the foreign employees are concerned, the HR systems seemed to work well for them (Black and Portert, 1991). For Chinese firms in Hong Kong, the need to apply their Chinese norms in the HR practices also helped ensure a stronger and more effective work force. In a study by Law, et.al., (2010) significant interest in the evaluation of occupational environments was indicated. The authors also pointed out that there is a need to make adjustments based on the occupational environment. However, adjustments in Western models in human resources management are often essential in other cultures. As pointed out by Law, et.al., (2010) limited studies have been carried out on how human resource managers would be impacted by their vocational leanings in decisions involving placement and selection. In order to evaluate the role of cultural qualities in the vocational model and the impact of vocational orientation on the decision of human practitioners, the authors set out to conduct their study in relation to this issue in Hong Kong (Law, et.al., 2010). The studies established evidence indicating a significant impact of special cultural qualities on Hong Kong firms (Law, et.al., 2010). Their study was also able to indicate the impact of cultural elements on the selection of employees. It pointed out that there are significant considerations for firms to consider in the selection of employees and these conceptualizations include both institutional and cultural elements, especially in instances where the firm is operating outside its home country. Siu, et.al., (1997) carried out their study in order to evaluate what motivates Hong Kong hotel workers. Their study evaluated how human resources management practices in their firm were able to ensure motivations for their work. The study covered about 1200 employees in Hong Kong hotels (Siu, et.al., 1997). Respondents indicated how opportunities for advancement and development, loyalty to employees, and good wages were significant elements in retention and favourable HRM practices for employees (Siu, et.al., 1997). Noticeably, many of these Hong Kong hotels also had much in common with international hotel chains and as a result human resources management were more performance-based and less supported by collectivist approaches to HRM (Siu, et.al., 1997). This study provides a more international conceptualization for businesses in Hong Kong, especially in relation to the hotel industry which is often influenced by globalization elements. For international hotels in Hong Kong, the impact of the institution is often stronger and more significant because these hotels are expected to display policies and practices already inherent in these international businesses (Siu, et.al., 1997). Although local flavours and elements may be seen in the human resources management, these are often not given as much priority as the institutional practices. Braun and Warner (2002) discuss how businesses in China manage their human resources based on implemented changes in the past twenty years. The multinational companies have established a strategic investor phase where their integration into the country’s operations has also gained much attention (Braun and Warner, 2002). For these companies, HRM has become a strategically important element in their management activities. The study was able to indicate that human resource functions are important for multinational companies and that their institutional practices have been important elements in their operations in China (Braun and Warner, 2002). For Chinese firms, human resources management have also become important elements for the companies and the role of adequate human resource practices have also become more significant in securing higher employee retention and job satisfaction (Braun and Warner, 2002). This study highlights the importance of institutional practices in human rights management for international MNCs. The investments in their firms have been primarily based on their ability to institute their own policies in their firms. With some degree of difficulty, especially for Chinese and local employees in Hong Kong who often have different and cultural adjustments in management, most international firms have nevertheless managed to retain the institutional policies of their firms in Hong Kong (Braun and Warner, 2002). This study is also supported by the Shaw study which also points out the more significant impact of institutional policies (as compared to cultural elements) on HRM practices for international firms operating in Hong Kong. The study by Zhang and Edwards (2003) explains how multinational and HRMs strategies are often dictated, sometimes limited by national differences, mostly in relation to national cultural and institutional qualities. It is often assumed that localisation in HRM practices is often limited by the differences in the institutional practices of the country of origin (Zhang and Edwards, 2003). Based on this perspective, it is important to compare qualities of Chinese HRM systems in Hong Kong with MNCs operating in Hong Kong and to evaluate how these differences reflect the impact of the institutional qualities or of the culture. This study revealed that human resources management choices and practices for countries operating in other countries manifest apparent qualities of their country of origin (Zhang and Edwards, 2003). Human resource choices are based on their need to compete in the international market and in order to retain a distinct identity within this market, they also have to carry the identity of their countries of origin (Zhang and Edwards, 2003). Nevertheless, localization is often also observed where applicable, especially in various stages of economic development where adjustments are often needed in order to gain competence in their home countries. This study provides a strong basis for research for Chinese firms operating outside their home countries, and also relate to how UK firms may operate in China and Hong Kong, regions which are very much surrounded by various traditions and cultures. Hofstede (1991) discuss how differences in national management culture can limit the transfer of western human rights practices to China. Significant attempts have been carried out in order to assess these differences and to understand how they impact HRM transfer. Hofstede (1991) discusses that Chinese culture highlights power distance, limited individualism, moderate uncertainty avoidance and masculinity, and strong in terms of long-term orientation. Hofstede (1991) emphasizes the importance of the following elements in the management of Chinese businesses based on cultural elements: respecting hierarchy or seniority, group orientation processes, preserving one’s ‘face,’ protecting relations in decision-making processes via conflict avoidance, limited debates in decision-making processes, avoiding challenging of managers in public. Hofstede (1991) also highlights the importance of equality and being average, as well as avoiding competition and conflicts with other workers and with one’s superiors. The emphasis for the Chinese culture is on establishing smooth relations. This discussion provides a strong description for Chinese culture, one which is very much apparent in Hong Kong industries. These elements are usually seen in Chinese firms operating in Hong Kong, and for MNCs in the country, these elements are not clearly apparent. Young, et.al., (1996) support the above notions discussed by Hofstede and further claim that in Hong Kong, these same human resources elements are apparent in the workplace, especially where predominantly the workers and managers in the Hong Kong firms are of Chinese descent. Where a blending of cultures would be apparent in the workplace, the HRM adjustments have to be made to accommodate both the institutional as well as the cultural elements impacting human resources (Young, et.al., 1996). In effect, this study supports the ideas already forwarded in previous studies highlighting the fact that institutional and cultural elements both play a significant role in human resource management for firms operating in Hong Kong. Branine (1997) discusses some adjustments made in the human resources management among Chinese businesses in the mainland and in its protected and identified regions (Taiwan and Hong Kong). Branine (1997) discusses how Chinese businesses have been gravitating towards collectivism and higher power distance, including a mixture of collectivism and individualism practices. These businesses are apparently adopting a more individual-based culture by according their employees individual rights and responsibilities (Branine, 1997). Although individualism and competitiveness have been emphasized, complying with the organization goals is still an important element in the workplace. Moreover, collectivism is still considered a dominant element of the social processes in the workplace. As pointed out by Branine (1997), socio-cultural elements are supported by the Chinese norms of solidarity, mutual assistance, honesty, and obedience to the law. These norms are deeply rooted in the Chinese ideologies and still continue to impact on the various elements of work behaviour and relations. This study also provides an important study relating the importance of practices like individualism in Chinese firms which is usually not traditionally part of Chinese norms (Branine, 1997). It provides an important groundwork for future studies which may be taken in order to further evaluate how Western corporate practices translate to Chinese firms, within and outside mainland China. In the study by Storey (1995), the author discussed how UK MNCs had basic differences in their human resources management which was high in individualism and low on uncertainty avoidance and power distance, and also high on masculinity and femininity. Based on these cultural values, the human resources management in these UK MNCs had qualities of individual autonomy and achievement, also dissent and risk taking, including defined sexual roles, as well as defined male values of assertiveness and admired possessions (Storey, 1995). Similar HRM styles were also seen in their MNCs in Hong Kong where expectations of individualism were apparent among managers (Storey, 1995). Such individualism was also encouraged among the workers. Difficulties in achieving and implementing such individualistic values have been experienced by HR managers operating in Hong Kong while managing Chinese employees, however, these difficulties have often been resolved by primarily observing institutional practices while still accommodating cultural qualities in their host country, Storey (1995) discusses how these practices are based on the applications being made, moving from an adversarial to a partnership model in human resources management. Employees are also often encouraged to conform to industrial practices in order to ensure harmonious relations within the organization (Storey, 1995). However, Chinese workers are often steep in their beliefs and practices and for MNCs, adjustments within their human resources policies are often necessary in order to ensure the harmonious workings of their institution. The corporate human resource management in China, including its autonomous provinces like Hong Kong and Taiwan have shifted from a centrally-operated to a more market-oriented structure. Such a market-orientated approach is based on more autonomy in terms of production and human resource management (Storey, 1995). It is still apparent however that many traditional qualities remain (Rowley and Benson, 2000). Some form of interference from the government is often expected for the less-developed labour market, especially those adopting western HRM practices in their institution. For UK, on the other hand, it has a mature labour force and not much interference in their HRM practices, especially while they are in their home states. Translating such a culture in their foreign subsidiaries can be a significant challenge especially where they may be faced with a highly traditional society and workforce (Rowley and Benson, 2000). The above studies provide a foundation for this dissertation, especially in relation to the human resources practices of multinational firms operating in Hong Kong. The studies provide general details which are mostly based on institutional and cultural assessments on human resources practices for various firms in Hong Kong and in other countries. Limitations of these studies are mostly on the lack of specific companies reviewed by the authors. These studies are also not current with the lack of current studies from which data can be gathered. These studies also do not include evaluation on the British influence in Hong Kong, especially considering how the territory was once under British rule. The basis of this current study is on a more specific evaluation of foreign MNCs operating in Hong Kong, evaluating how HR practices may be influenced by culture and institutional policies. References Aryee, S., Luk, V., Leung, A., Lo, S., 1999. 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Available at: http://www.ilo.org/public/english/iira/documents/congresses/world_13/track_3_zhang.pdf [Accessed 24 August 2012]. Read More